The London Stock Exchange Group (LSEG) revealed on 27 February 2019 that it has invested in a start-up responsible for the world’s first cryptocurrency bond. This signals a growing trend in mainstream finance firms embracing the technology behind cryptocurrency, suggests Tom Wilson of Reuters.
Nivaura is a digital platform that issues and administers corporate bonds, loans and equity, and “enables financial instruments to be settled on existing clearing infrastructure, or as digital tokens that are recorded on blockchain”, writes Wilson, who points to a claim by Nivaura that the company can reduce the time taken to issue bonds and equities by up to 80%. In November 2017, the platform issued the world’s first automated cryptocurrency-denominated bond issuance.
LSEG led a US$20m fundraising round in Nivaura, taking an "undisclosed minority stake" in the firm. It’s not the only financial firm that has taken to blockchain-related technologies recently, with JP Morgan launching its own digital token so clients can instantly transfer dollars over blockchain, and HSBC using a blockchain-based system to settle foreign exchange trades, writes Wilson.
LSEG’s head of international development, Nikhil Rathi, told Reuters that the group is “seeking to leverage technology to develop new products, boost efficiency and support growth”, Wilson reports.
Cryptocurrency to improve cash flow in Kenya
On the African continent, cryptocurrencies, which “have the potential to help cash strapped communities”, are being introduced on a local scale, says David Brancaccio on American radio programme Marketplace Morning Report
on 25 February. Halima Gikandi reports from Nairobi, Kenya, explaining that Gatina-Pesa is the local cryptocurrency for the neighbourhood of Gatina, Nairobi.
She explains that Grassroots Economics, a non-profit organisation seeking to empower marginalised communities and their economic futures, created the local currency in 2015, starting as a paper currency. But in 2018, it partnered with Swiss non-profit company Bancor to digitise the Gatina-Pesa.
Will Ruddock, co-founder of Grassroots Economics, explains on the show that there is little cash in these communities and giving change can be a serious hassle. Gikandi reports that many of the residents spend their money outside of the community, which has created a cash flow problem – but the cryptocurrency could help this issue.
Njuguna Ndung’u, executive director of the African Economic Research Consortium and the former head of Kenya's Central Bank, advises on the show that regulation is needed for cryptocurrencies. Gikandi notes that this could change, as the Kenyan government has requested a blockchain taskforce looks at digital currency.
Marketplace Morning Report extract
A line in the sandbox?
Despite the Kenyan government’s interest in reviewing digital currency by a blockchain taskforce, Paul Muthaura, CEO of Capital Markets Authority of Kenya (CMA Kenya), has said that “cryptocurrency firms will not be considered for the regulatory sandbox created for financial products”, writes ‘CryptoDavid’ for Bitcoin KE
, a news site reporting on blockchain news in Kenya.
This is because “the CMA’s mandate does not extend to currency,” explains Muthaura in the article. However, “CMA Kenya has consulted with the Kenya Blockchain Taskforce on the regulatory sandbox in line with national policy on financial innovation”, writes CryptoDavid.
“The regulatory sandbox, which is still undergoing review, aims to offer a controlled environment for fintech firms to innovate and create financial products that protect the interests of consumers.”
Cryptocurrencies are not being recognised by the CMA or Central Bank of Kenya for regulation yet, he says.
Bitcoin KE article
While cryptocurrency remains questionable in its market performance, and also unregulated in some countries, could the digital currency be a helpful solution for communities with a cashflow problem?
Seen a blog, news story or discussion online that you think might interest CISI members? Email email@example.com.